Small-Cap Stocks to Buy: Carrizo Oil & Gas Inc (CRZO)
Oil and gas has taken a beating, and Carrizo Oil & Gas Inc (NASDAQ:CRZO) has not been immune despite a prime, high-quality asset in the Permian basin. Carrizo also has exposure to good shale assets (103,300 net acres in the Eagle Ford Shale in South Texas) and Marcellus Shale in the Northeast.
The financial health of the company is also in good shape, again despite a challenging macro environment. Liquidity is ample, and the focus is on smart capital allocation to the highest return assets. CRZO’s intent is to invest another $540 million this year, the bulk of it going toward developing Eagle Ford. Management expects these efforts to produce 17-20% YOY growth in terms of net daily production across the total portfolio.
Carrizo has been pushing for better efficiencies at Eagle Ford. Frac prices were up double-digits in the first quarter, but operational efficiencies were able to more than offset that, which is impressive management by CRZO. In tight times for the industry, the most efficient operators will come out the strongest, and Carrizo is just that.
Well costs are down, while lateral drilled per-rig month is up sharply. These efficiency gains will translate to better economics that will translate into better earnings and better per share prices.